BBC News - Germany's economic growth slows sharply in 2012

The German economy grew by 0.7% in 2012, a sharp slowdown on the previous year, preliminary figures show.

Germany is Europe's largest economy and the world's second largest exporter

The figure was well below the 3% growth seen in 2011 and suggests the economy contracted in the fourth quarter.

"In 2012, the German economy proved to be resistant in a difficult economic environment and withstood the European recession," the federal statistics office Destatis said.

Some analysts believe the German economy will enter recession itself.

Destatis said economic activity "slowed down considerably" in the second half of the year, and particularly in the final quarter.

"The full-year growth figure [of 0.7%] implies a contraction of around half a percentage point in the fourth quarter," the office's top statistician Norbert Raeth said.

Last month, Germany's central bank, the Bundesbank, cut its growth forecast for this year to 0.4% and warned that the economy may have contracted in the final three months of 2012, and may do so again in first quarter of 2013.

The eurozone economy as a whole is already in recession, having contracted in both in the third and fourth quarters of last year.

Spending boost

For 2012 as a whole, Destatis said foreign trade was "very robust", with exports up 4.1% on 2011. Imports grew by 2.3%. The positive trade balance was "once again the main driving force for economic growth in Germany".

Household expenditure increased by 0.8%, while government spending was up 1%.

The figures also showed that while the service sector of the economy expanded, industry and construction contracted.

Destatis will publish official fourth-quarter growth figures on 14 

Reuters News - U.S. economy to grow 2.5 percent this year: Fed's Evans

Chicago Federal Reserve Bank President Charles Evans speaks during the Sasin Bangkok Forum July 9, 2012.

Credit: Reuters/Sukree Sukplang

By Clement Tan

HONG KONG | Mon Jan 14, 2013 12:31am EST

(Reuters) - The U.S. economy is expected to grow by 2.5 percent in 2013, improving to 3.5 percent growth in 2014, top Fed official Charles Evans said on Monday.

Evans also forecast the U.S. unemployment rate would be 7.4 percent this year, easing to about 7 percent in 2014.

"One good indicator of labor market improvement would be if we saw payroll employment increase by 200,000 each month for a number of months. We've been averaging about 150,000, but it's been very uneven ... we need a higher pace of employment growth and less volatility in that pace," Chicago Fed President Evans said.

The creation of 1 million jobs over six months would be a "substantive" improvement, but bringing unemployment down to the key level of 6.5 percent was likely to take much longer, probably until mid-2015, he said, speaking at the Asian Financial Forum in Hong Kong.

The U.S. Federal Reserve's decision last year to tie monetary policy to specific economic conditions should help boost the recovery without letting inflation take hold, said Evans, a chief architect of the policy.

It also provides additional accommodation by assuring markets that rates will remain low even after the economy perks up, he said.

"Given more explicit conditionality, markets can be more confident that we will provide the monetary accommodation necessary to close the large resource gaps that currently exist," he said. "Additionally, the public can be more certain that we will not wait too long to tighten if inflation were to become a substantial concern."

Last month, the Fed ramped up asset purchases aimed at spurring growth, and pledged to keep rates near zero until the unemployment rate drops to 6.5 percent, as long as inflation expectations do not climb above 2.5 percent.

Evans, who rotates into a voting spot on the Fed's policy-setting panel this year, had been pushing for exactly such a threshold-based policy for more than a year, saying the Fed needed to take a much more activist role in trying to meet its mandate to boost employment.

His speech on Monday was his first since mid-2011 to omit an explicit call for further Fed easing, suggesting he is now comfortable that the current stance of monetary policy will help bring down unemployment, still high at 7.8 percent.

Kansas City Fed President Esther George and other critics of the Fed's bond-buying program and low-rate policy have warned the central bank's actions could overheat the economy, leading to unwanted inflation.

Evans, one of several policy "doves" set to speak early this week, sought to head off such criticism.

While the Fed's new 2.5-percent inflation threshold "allows for inflation at times to run modestly above" the Fed's 2-percent goal, it in fact acts as a safeguard against overheating, he said.

The U.S. economy grew at a 3.1 percent annual rate in the third quarter, but growth is expected to have slowed in the final months of the year. Last month, Fed policymakers said they expected GDP growth of between 2.3 to 3.0 percent this year, and 3.0 to 3.5 percent in 2014.

Meanwhile, most expect inflation to run a bit below the Fed's 2-percent target.

U.S. lawmakers on January 1 struck a partial deal that avoids the worst of planned tax rises known as the "fiscal cliff," but put off big decisions on spending cuts for two more months.

Evans said the effects of fiscal policy on U.S. growth are so far about what he had expected when making his growth forecasts late last year.

But he cautioned lawmakers on taking overly aggressive steps to cut back spending.

"The United States must consolidate its public sector finances; but it must do so gradually if we are to avoid further economic turmoil or another downturn," Evans said.

(Writing by Ann Saphir and Anne Marie Roantree; Editing by Daniel Magnowski)

BBC News - Japanese government approves $116bn stimulus package

The Japanese government has approved a fresh 10.3 trillion yen ($116bn; £72bn) stimulus package in an attempt to spur a revival in its economy.

Analyst Jim McCaughan says a weak yen is "key" for economic growth

The package will include infrastructure spending, as well as incentives for businesses to boost investment.

Tokyo estimates that the stimulus will boost Japan's economy by 2% and create 600,000 jobs.

Japan's economy has been hurt by a dip in exports amid slowing global demand and subdued domestic consumption.

The world's third-largest economy is currently in a recession, having contracted for two quarters in a row.

"Unfortunately, the previous administration failed to work out how to boost growth and expand the economic pie," Prime Minister Shinzo Abe said.

"It is vital that we have an economic strategy that can create jobs and raise incomes to sustain growth."

Included in the spending package are plans to rebuild areas devastated by the earthquake and tsunami of 2011, support for regional economies, and more investment in education and social security.

Weaker currency

Mr Abe, who took office in December, has promised to take aggressive measures to help put the economy back on a growth track.

Among those has been a pledge to take measures to weaken the yen.

A weaker Japanese currency bodes well for the country's exporters as it makes their goods less expensive to foreign buyers and also helps boost their profits when they repatriate their foreign earnings back home.

The yen has weakened nearly 12% against the US dollar since November last year on hopes of such moves. It was trading close to 88.97 yen against the US dollar in Asian trade on Friday.

The government said that it would continue to keep a watch on the currency's movements and "respond as appropriate".

Japanese shares rose on the news of the stimulus with the Nikkei 225 index gaining 1.4%.

The Japanese government also hopes the latest stimulus spending will help to tackle deflation. Japan has been fighting deflation, or falling prices, for many years. It has been a big hurdle in policymakers' attempts to boost domestic demand because consumers tend to put off purchases in the hope of a better deal in the future.

'Empty coffers'

However, some analysts said the stimulus was only a short-term solution to Japan's economic issues.

They said that while such an big amount of money being injected into the economy was likely to help spur growth, further steps were needed to sustain it in the long run including measures to help exporters and reforms aimed at boosting domestic consumption.

"So far what we have seen is measures to kick-start the economy," Martin Schulz of Fujitsu Research Institute told the BBC.

"But once the stimulus boost is over, the coffers will be empty again and Japan will have no more money to spend."

Japan's exports have been hurt by a slowdown in demand from key markets such as the US, eurozone and China.

While sales to the US and eurozone have been hit by economic issues in those markets, those to China have been affected by a territorial dispute between the two countries.

China is Japan's biggest trading partner and is also among the fastest growing consumer markets.

Mr Schulz said Japan needed to improve its relations with China to help its exporters' sales in the country, not least because demand from the US and eurozone is likely to remain subdued in the near term.

On the domestic front, Japan needs to ease regulations in key sectors such as construction, healthcare, retail and agriculture to make them more attractive for investors, Mr Schulz added.

Reuters News - EU's Rehn rules out Cyprus debt restructuring

European Economic and Monetary Affairs Commissioner Olli Rehn speaks during a joint news conference with EU Commission President Jose Manuel Barroso (unseen) at the EU Commission headquarters in Brussels November 28, 2012.

Credit: Reuters/Francois Lenoir

BERLIN | Fri Jan 11, 2013 4:11am EST

(Reuters) - The euro zone is not considering a debtrestructuring for Cyprus, the EU's top economic official was quoted on Friday as saying, as the heavily indebted island struggles to negotiate an international aid deal.

Cyprus applied for a financial rescue last June after its banks suffered huge losses on the EU-approved writedown on Greece's debt.

But it has so far failed to persuade its European partners to sign off on the package, given concerns the level of the island's indebtedness means it would be unable to repay the aid without further concessions from international lenders.

But "a haircut is not an option for us," Olli Rehn, the European Economic and Monetary Affairs Commissioner, told the German business daily Handelsblatt in an interview.

Ratings agency Moody's slashed Cyprus's credit rating by three notches late on Thursday on an expected rise in its liabilities, adding that it saw a 50 percent probability the Mediterranean island would "default outright or press for a distressed exchange" on its debt.

In Nicosia, Cypriot Finance Minister Vassos Shiarly said he was "not at all happy" about the Moody's downgrade but wanted to focus on the positive outlook for Cyprus offered by the anticipated conclusion of a bailout deal.

The rescue package could reach 17 billion euros, virtually equivalent to Cyprus' entire economic output.

But hurdles to a deal are stacking up.

Germany, the EU's paymaster, has expressed unease about channeling taxpayers' money into a country seen by some as a hub of money laundering. Cyprus is a popular tax haven for wealthy Russians but says it fully complies with international rules against money laundering.

Rehn said he shared those concerns.

"The government in Nicosia has already changed its legislation (on money laundering). But we must now ensure that the new laws are also applied. The problems are known to me," he said.

Germany's main opposition Social Democrats (SPD) have said they would not back a request in the lower house of parliament for financial help for Cyprus due to their concerns over "dirty money" in the country's banks.

Members of Chancellor Angela Merkel's own coalition think likewise.

Merkel, who has so far had the centre left's support for euro zone bailout votes, has said she expects the talks on aid for Cyprus to take time and has called implicitly for privatizations the island's leftist government has ruled out.

Cyprus holds presidential elections next month.

Rehn played down worries of an SPD veto of aid for Cyprus.

"The SPD is a deeply pro-European political force. So I believe that they can eventually support an aid package for Cyprus if we have found a convincing solution on Cyprus which is acceptable for taxpayers and which helps finally to clear up the problem of money laundering," Rehn said.

Rehn said international creditors wanted to follow the Spanish model in restructuring Cyprus's banking sector, adding he could not go into details as negotiations are still ongoing.

(Reporting by Gareth Jones and Michele Kambas in Nicosia; Editing by John Stonestreet)

BBC News - US is main source of EU credit card fraud - Europol

Data breaches in the US account for most of the credit card fraud affecting the EU, a new police report says.

Europol says cross-border specialised teams are needed to tackle card fraud

Criminal gangs are making about 1.5bn euros (£1.2bn; $2bn) annually from such fraud, the EU police agency Europol says, regretting that compliance with new security features remains patchy.

In 2011 nearly all fraud involving EU cards took place outside the EU. Chip-and-PIN security used in the EU is not yet global, Europol notes.

Such fraud cases overseas have risen.

Besides the US, the fraud networks are also very active in Brazil, Colombia, the Dominican Republic, Mexico and Russia, Europol says.

"So far most of the credit card numbers misused in the EU have come from data breaches in the US," Europol says, adding that most illegal face-to-face card transactions with EU-issued cards also happened in the US.

In 2011 alone nearly 727m payment cards were issued in the EU.

Fraudulent "card-not-present" transactions, where personal data is stolen on the internet, account for about 60% of the losses from credit card fraud, according to Europol.

The agency is launching a new Cybercrime Centre in The Hague this week, dedicated to fighting such crimes.

Europol notes a range of problems in tackling credit card fraud:

• Proper regulations for reporting data breaches to police are lacking
• Criminals operate in complex international networks, exploiting gaps in police and justice co-operation
• Often the crimes take place online in several countries, with numerous people involved
• Data thefts on the internet usually involve huge quantities of personal data, which criminals then sell on the internet.

Reuters News - ECB to hold fire as economy shows glimmers of hope

An illuminated euro sign is seen in front of the headquarters of the European Central Bank (ECB) in the late evening in Frankfurt January 8, 2013.

Credit: Reuters/Kai Pfaffenbach

By Sakari Suoninen and Eva Kuehnen

FRANKFURT | Thu Jan 10, 2013 3:40am EST

(Reuters) - The European Central Bank is expected to keep interest rates at a record low of 0.75 percent on Thursday, refraining from a cut as the euro zoneeconomy shows some signs of stabilizing and inflation still tops its target.

The 17-country euro zone is in recession, but recent data points to some stabilization, and ECB President Mario Draghi might strike a slightly more positive tone in the news conference that follows the rate decision.

The ECB's 23-man Governing Council began its meeting at 0800 GMT to consider this month's policy decision.

A Reuters poll published on Monday pointed to the ECB keeping rates on hold, though the economists surveyed could not agree on the chances of a cut in the next few months due to a murky economic outlook.

"Rates are definitely on hold. Nothing has been spectacular enough in recent data to force the ECB to any action," Deutsche Bank economist Gilles Moec said.

"There is a recession, but no further deterioration. Lending is weak, but also not deteriorating further, so the ECB is not compelled to act."

The Governing Council will find some comfort from improving business morale as well as a survey of purchasing managers, which gave tentative signs that the worst of the downturn may have passed.

"Since the December meeting key figures have generally surprised on the upside," Nordea analyst Anders Svendsen said in a note to investors.

While the ECB had, in Draghi's words, "a wide discussion" on reducing rates last month, the grounds for such a move have not grown and Executive Board members have argued against a cut.

Yves Mersch said last month he did not see the logic of a debate about the ECB cutting its main rate and Peter Praet said there was little room to cut.

Another cut of the refinancing rate would raise the question of whether the ECB would also lower its deposit rate - currently at zero - by the same amount, which would push it into negative territory, essentially charging a fee, for the first time.

Even though Draghi has said the bank was "operationally ready" for such a step, it has grown increasingly wary of the idea over the past couple of months, a source with knowledge of the ECB's thinking said.

Negative deposit rates could deal a hefty blow to money market funds, which have already seen cash outflows since the ECB cut the deposit rate to zero in July. The rate is a peg for short-dated money market rates and at zero it is already almost impossible for funds to generate a return for their investors.

Executive Board member Joerg Asmussen said last month he would be "very reluctant" about the ECB cutting the deposit rate any further, adding that "our (monetary) policy is very accommodative".

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INFLATION STUBBORN

ECB staff projections published last month saw inflation at about 1.4 percent in 2014, which would usually justify another interest rate cut.

The central bank also sees inflation falling below 2 percent this year with underlying price pressures remaining moderate.

But inflation has eased more slowly than the ECB initially expected and as long as it misses the target - it has been above 2 percent for more than 2 years - a cut could be difficult to justify.

Furthermore, in the euro zone's largest economy, Germany, prices rose faster in December than in the previous month.

In addition to gauging whether the ECB is entertaining another cut or not, Draghi will be pressed on what other options the ECB has, especially to improve lackluster bank lending.

ECB data showed last week that bank lending to the private sector fell at an annual rate of 0.8 percent in November.

At his December news conference, Draghi attributed the drop mainly to demand factors, but added that in a number of countries, credit supply is restricted.

A move by global regulators to give banks more time and flexibility to build up cash reserves is expected to do little to support a recovery in Europe, where recession-hit firms and households have scant appetite for more debt.

"One thing the ECB needs to engineer is recovery in lending," Rabobank economist Elwin de Groot said.

(Reporting by Sakari Suoninen. Editing by Jeremy Gaunt.)

BBC News - US oil production 'to jump by a quarter by 2014'

By Richard AndersonBusiness reporter, BBC News

US oil production will jump by a quarter by 2014 to its highest level in 26 years, figures suggest.

Shale oil and gas is now big business in the US, but has yet to to adopted elsewhere in the world

This is mainly because of the discovery of vast reserves of shale oil.

The Energy Information Administration (EIA) in the US also forecast average global oil prices would fall from $112 a barrel in 2012 to $99 in 2014.

It said US oil imports would fall by a quarter between 2012 and 2014, because of rising domestic production and the discovery of shale gas.

US oil imports have been falling since 2005, when they stood at 12.5 million barrels a day. By 2014, they will have halved to six million barrels, the EIA said.

Domestic production, which stood at 6.4 million barrels last year, will rise to 7.9 million barrels next year, the highest level since 1988.

"US oil production is rising extraordinarily quickly, entirely because of the application of fracking, [which is] unleashing very significant new resources into the market," Seth Kleinman, global head of energy strategy at Citigroup, told the BBC.

Fracking is the process of blasting water at high pressure into shale rock to release oil or gas held within it. It has become widespread in the US and domestic gas prices have plummeted as a result.

Many have hailed shale gas as the saviour of the US energy market. In fact, the International Energy Agency (IEA) has said it expects the US to overtake Russia as the world's biggest gas producer by 2015 and to become "all but self-sufficient" in its energy needs by about 2035.

But critics of shale gas point to environmental concerns such as high water use and possible water contamination, the release of methane and, to a lesser extent, earth tremors caused by drilling.

The process has been banned in France, while the UK recently lifted a moratorium on drilling for shale gas.

'Transformational shift'

Shale gas also helps to explain the sharp drop in US oil imports forecast by the EIA in the next two years.

The move away from oil "is being driven by tighter fuel economy mandates and the transformational shift from oil to natural gas, which is extraordinarily cheap compared with oil", says Mr Kleinman.

But the US will continue to increase oil production for domestic use and to generate revenues from exports.

The US will overtake Saudi Arabia as the world's biggest oil producer "by around 2020", an International Energy Agency (IEA) report predicted at the end of last year.

In fact, global oil production will continue rise, thanks to the discovery of shale oil.

"Total oil production is about to rise," Fatih Birol, chief economist at the IEA, told the BBC.

"We estimate total oil production to reach about 100 million barrels a day, about 20 million higher than today.

"This growth comes from unconventional [shale] oil."

The discovery of shale oil means global oil production will not peak in the next 20 years, Mr Birol added.

The increase in oil production comes at a time when coal production is also rising sharply, largely to provide cheap energy to meet exploding demand in developing economies, particularly in Asia.

The increase in production of both coal and oil has raised concerns about meeting carbon dioxide emissions targets, designed to slow the rate of increase in global temperatures.